Banking Bill Invites the Next Global Meltdown

The financial overhaul bill set for passage sometime next week is supposed to "bring accountability to Wall Street." In announcing an agreement between the House and Senate last week, Senator Christopher Dodd noted that "the American people have called on us to set clear rules of the road for the financial industry to prevent a repeat of the financial collapse that cost so many so dearly."

The final bill, though, does little to prevent a systemically important bank from failing, and makes it far more difficult for regulators to assist one seeking to avoid failure. This all but insures that the system-wide calamity the bill should be trying to prevent will, in fact, occur again.

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The Dodd-Frank Act, signed into law in July 2010, represented the most significant and controversial overhaul of the U.S. financial regulatory system since the Great Depression. Forty NYU Stern faculty, including editors Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson, and Ingo Walter, provide a definitive analysis of the Act, expose key flaws and propose solutions to inform the rules’ adoption by regulators, in a new book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, November 2010).